Page 170 - Profile's Unit Trusts and Collective Investments 2021 issue 2

CHAPTER 9

a flurry of regulatory pressure and derated along with Chinese tech stocks. We have viewed this as
a buying opportunity and find Tencent undervalued at these levels. They have proven to navigate
these successfully in the past, with the Gaming clamp-down in 2018. We think they will do this
again and continue to grow more than 10% p.a. over the medium term. They have an unrivalled
ecosystem with various under-monetized opportunities. Their investment portfolio is worth
approximately $200bn, almost 35% of their current market cap.
Impala and Anglo America Plc. The key risk to global growth continues to be the pandemic. The
rapid spread of the more transmittable Delta variant has created uncertainty around a full global
reopening. However, evidence suggests that vaccinations are an effective tool against this new
variant, breaking the link between infections and hospitalisations. We remain constructive that we
are in a strong commodity up-cycle underpinned by continued global growth, supportive
infrastructure plans and greenification targets that will require considerable amounts of industrial
metals (favouring copper, nickel and PGMs). From a bottom-up perspective, the equities are not
fully pricing in the commodity spot prices and we continue to see upside potential.

H4 Worldwide Equity Fund

Sector: Worldwide–Equity–General
Fund manager: Yolanda Naudé
Benchmark: 50% FTSE/JSE All Share (J203T), 50% MSCI All Country World USD Net
Return Index

Returns to investors 1 year 3 years
H4 Worldwide Equity Fund 16.37% 10.87%
Sector Average 13.54% 6.74%
Inflation (CPI) 4.87% 3.85%
ProfileData performance stats to 30 June 2021: CAGR with dividends reinvested

Please describe your investment universe.
The H4 Worldwide Equity Fund’s investment universe is wide and fairly flexible, with the more
than 80% equity exposure requirement being the only real restriction/constraint/requirement.
Other than that, flexibility allows the fund to invest between 0% and 100% domestically or offshore.
The fund’s internally determined strategic asset allocation (SAA) consists of a 35% / 65% split
between domestic equity and offshore equity, and the return target of the fund is to beat South
African consumer inflation +7% per annum over rolling 7-year periods.
Please comment on your investment year (July 2020 – June 2021) from a fund manager's
point of view.
Between 31 July 2020 and 30 June 2021 the H4 Worldwide Equity Fund delivered 16.4% versus
its benchmark's (SA CPI +7%) 12.1% over the same period. The main contributors to this
performance were:
The fund's South African equity exposure (34.8% allocation at the end of June 2021 via a
FTSE/JSE Capped Top 40 mandate), delivering 26.6%;
The fund's offshore equity exposure (58.7% allocation at the end of June 2021, as measured by the
MSCI All Country World Index) which delivered nearly 40% in US dollar terms, and a still decent
14.4% when the impact of the sharply stronger rand over this period is taken into account.
In terms of risk management, what methods or strategies are you able to use to protect your
clients' investments?
Investors in this fund typically have an equity type risk profile and hence should be able to
accept the volatility associated with equity investments. However, we can employ both currency
hedging (to protect against the negative impact on fund performance of rand strength) and equity
market hedging if/when those strategies are aligned with our views on the rand and/or the equity
market locally or offshore.

168 Profile’s Unit Trusts & Collective Investments — Understanding Unit Trusts